Innogenetics reports 2005 results: Positive end-year developments strengthen prospects for 2006, with diagnostics growth resuming
Gent (Belgium), February 27, 2006 – Innogenetics today announced its audited results of operations for the year ending on December 31, 2005.

2005 Financial Highlights (versus 2004)
- Net loss reduced by 17% to €11.6 million versus €14.1 million in 2004
- Product sales decline by 9% to reach €42.3 million
- Total revenues(1) decrease by 14% to reach €54.8 million
- Total gross margin slightly reduced to 57.7% versus 58.8%
- R&D expenses drop to € 32.5 million
- Operating expenses reduced by 4%
- Operating loss from continuing operations rises to €20.0 million versus €14.1 million in 2004
- Profit from discontinued operations amounted to €9.5 million
- Cash position boosted to €56.3 million compared to €26.1 million at end 2004

Diagnostics Operations 2005: continued profitability
- Product sales decreased by 11.8% to reach €40.3 million: sales of infectious diseases products went down; sales of neurodegeneration and genetic testing rose
- Direct sales by Innogenetics’ subsidiaries increased by 14%
- Gross margin stable at 59.4% versus 59.5% in 2004
- Operating expenses slightly down to €19.9 million versus €20.4 million
- Operating profit of €0.7 million
- Legal actions to enforce HCV genotyping patent and redress infectious diseases sales and royalties; successful resolution of patent suit with Third Wave Technologies in February 2006
- Control of HLA business regained upon termination of agreement with Abbott
- Full PCR license acquired from Roche Diagnostics

Therapeutics: programs on track plus new contract biomanufacturing deal
- Results of 916 phase 2b clinical study with HCV therapeutic vaccine candidate inconclusive due to unexpectedly slow progression of liver fibrosis in the placebo group, leading to the extension of HCV 918 study until 2007
- Technical breakthrough in polyepitope program increases chances for vaccine development
- Pharmexa (formerly Epimmune) collaboration for HCV and HPV extended to March 2006
- First successful delivery on a biological manufacturing contract with major pharmaceutical company paves way for increased activities as contract manufacturer

Prospects for 2006
- Projected revenues(1) to reach €68 million in 2006
- Product launches in all main diagnostics areas to accelerate growth in 2006 and 2007
- Double-digit sales growth by subsidiaries to continue
- 4-MAT™ microarray technology platform launch in mid-2006 to expand market opportunities
- Extended HCV E1 therapeutic vaccine program on track; results expected for second half 2007
- New contracts in biomanufacturing to expand Therapeutics business opportunities

Frank Morich, CEO of Innogenetics, commented: “2005 was generally a year of mixed fortunes for Innogenetics. Two capital increases and the sale of our Spanish subsidiary markedly strengthened our cash position and net income, thereby counterbalancing relatively weak top-line performance. However, positive end-2005 developments clearly improved prospects for accelerating profitability in 2006. In Diagnostics, these included: legal actions that led to an early-2006 licensing deal for our HCV patent estate with TWT, one of the two companies we took to court; steady progress towards the launch of Innogenetics’ new 4-MAT microarray technology platform; the acquisition of a full PCR license from Roche; and the emphasis on the sales of our own, high-margin products by our subsidiaries.”

Frank Morich went on to add: “In Therapeutics, our vaccine programs progressed steadily. Despite the inconclusive results of the HCV 916 vaccine trial, the principle investigators unanimously supported an extension of the HCV 918 trial to 2007. The Therapeutics R&D team achieved a key technical breakthrough in our other polyepitope vaccine program, and the Biologicals Group concluded a new major deal for biopharmaceutical contract manufacturing.”

The Innogenetics CEO concluded by saying: “These developments indicate that Innogenetics is gaining increased control over its major growth drivers. It is clear that the full PCR license from Roche combined with the tests to be launched on our new 4-MAT technology platform will diversify our product offerings and increase sales. Additionally, the launch by Roche of the new SeptiFast® test for rapid detection of sepsis and the biomanufacturing contract signed in 2005 represent new, growing revenue streams for our Company in the future.”

Diagnostics operations: Profitable despite lower product sales
For 2005, Innogenetics’ Diagnostics activities resulted in an operating profit from continuing operations of €0.7 million. The EBITDA(2) was also positive at €4.8 million, although substantially decreased compared to 2004. This was in large part due to the 11.8% decline in diagnostics product sales: from €45.7 million in 2004 to €40.3 million this year. The decrease occurred exclusively in the area of infectious disease tests. By contrast, trade sales in genetics and neurodegeneration tests were up by 34% and 39%, respectively.

Overall non-product sales revenues: mixed results
In 2005, royalty income of €3.5 million was just short of the €3.6 million figure posted in 2004. As expected, license fees reached just €2.8 million versus the €8.4 million in 2004. The difference was the milestone payment of €5 million received from Roche in 2004. License fees in 2005 essentially included the recognition of deferred income.

For its part, R&D contract income was lower at €2.7 million versus 3.4 million in 2004. This was counterbalanced by substantial grants received for R&D work in both Diagnostics and Therapeutics, which nearly doubled from €1.9 million last year to €3.5 million in 2005.

Expenses well under control
The slight decrease in the gross margin (57.7% versus 58.8% in 2004) essentially resulted from the impact of lower-margin contract manufacturing in the Therapeutics division (22.6% gross margin in 2005). Overall R&D expenses decreased slightly to €32.5 million compared to €33.3 million during the year 2004. This mainly reflected a reduction in Therapeutics R&D expenses that was countered by increased Diagnostics R&D expenditures.

Overall operating expenses declined slightly from € 25.4 million in 2004 to € 24.3 million in 2005. Marketing & sales spent €14.4 million, a 5% increase over 2004 that translated into the growth in sales by the subsidiaries. By contrast, administration expenses dropped from €11.7 million to €10.0 million in 2005. The decrease was essentially due to net adjustments in provisions.

Net loss for 2005 declines
In 2005, Innogenetics booked an operating loss of €20.0 million in 2005 compared to the 2004 loss of €14.1 million. This was counterbalanced by the significant €9.5 million profit from discontinued operations resulting from the sale of Innogenetics’ Spanish subsidiary. Net loss for 2005 was thereby reduced by 17% to reach €11.6 million in 2005 versus €14.1 million last year.

Cash position
As of December 31, 2005, Innogenetics’ cash position had appreciably strengthened to €56.3 million compared to the cash level of €26.1 million at the end of 2004. This sharp rise was fueled by capital increases of €33.3 million in March and €8 million in October, and by the proceeds of €16.7 million from the sale of the Spanish subsidiary in September.

(1) Revenues include product sales, royalties, license fees, grants, and R&D contract income.
(2) EBITDA, earnings before interests, taxes, depreciation, and amortization